Retirement

[jediuser598]

I hear people talk about retirement pretty often, and been thinking about it. What's the formula here, how much does it cost?

You guys are far more financially literate than me, so I figured I'd get you input.

If we looked at this in a freakanomics sort of way, say the retirement number is $1 million. (This is a cheap house somewhere in the country) then my objective would be to what, just get $1 million in the bank, any way possible? Or insert whatever number you want, but the objective would be, get that amount.

Any insight you guys could give would be appreciated, many thanks.

[Penner]

I started out with a Roth IRA. Those things are pretty much a non-taxable IRA where you can only put in 5,000 a year (or 5,500 if you are like 60 years old) and let it grow. There are also 401Ks and those are usually obtained through employers as part of your benefits package. I believe that the best advice is for you to just start saving right now. Personally, and ideally, everyone should've started saving for retirement at like 16 or 15, when they get their first job but teenagers are not known to be forward thinking, IMO.

[DBTrek]

Early retirement or late? Late retirement is easier because you can save a few hundred thousand (instead of a million) and in your late sixties/early seventies take out an annuity to provide a stable, predictable income. Think of an annuity as a reverse life insurance. You give a company $500,000 late in life because you figure you’ll live a lot longer. They agree to send you monthly payments, say $2200 a month for the rest of your life.
(Picked these numbers at random to make a point)

You’re gambling that you live long enough to make it worth the investment. They’re gambling that you’ll die sooner than you think and they’ll make bank.

Assuming SS is still around, maybe you’re drawing $1800 a month from that too. Meaning late in life you have $4000 a month coming your way for the rest of your days. Not too shabby, especially if you own a home by then.

If you want to retire in your thirties the best bet is to find a way to get really rich, really fast.

[jediuser598]

Early retirement or late? Late retirement is easier because you can save a few hundred thousand (instead of a million) and in your late sixties/early seventies take out an annuity to provide a stable, predictable income. Think of an annuity as a reverse life insurance. You give a company $500,000 late in life because you figure you’ll live a lot longer. They agree to send you monthly payments, say $2200 a month for the rest of your life.
(Picked these numbers at random to make a point)

You’re gambling that you live long enough to make it worth the investment. They’re gambling that you’ll die sooner than you think and they’ll make bank.

Assuming SS is still around, maybe you’re drawing $1800 a month from that too. Meaning late in life you have $4000 a month coming your way for the rest of your days. Not too shabby, especially if you own a home by then.

If you want to retire in your thirties the best bet is to find a way to get really rich, really fast.

So, retirement to put it simply, is to make enough to cover your expenses without having to work?

[Martin Hash]

Buy a house. Pay off the mortgage as soon as possible. Improve it. When you want to retire, Reverse Mortgage it for 20 years or so, until Social Security & Medicare kick in, then move and live on that. If you need more, use the Social Safety Net, you'll be old, playing dominos and bitching will be all you're doing anyway.

[brewster]

Buy a house. Pay off the mortgage as soon as possible. Improve it. When you want to retire, Reverse Mortgage it for 20 years or so, until Social Security & Medicare kick in, then move and live on that. If you need more, use the Social Safety Net, you'll be old, playing dominos and bitching will be all you're doing anyway.

Around here property has gone up so much seniors who bought in the 80's for peanuts are sitting in $2m plies of brick. They just revalued the assessments and raised their taxes. They're bitching and moaning about paying 1.6% and saying they're poor.

My addendum your plan is buy a multifamily house or more than one, and have rentals bringing in money till you die. The difference between this and your IRA is rental property is the only vehicle where everyday people invest on margin.

[PartyOf5]

There is not exact formula for retirement. How much you need depends on what you plan on doing in retirement and how long you expect to be retired.

If you are currently working, then your first step is to contribute to your 401k or 403b or whatever retirement plan your company offers. If they match, then make sure you take advantage of the full match. What that means is an employer sometimes will match what you put into your 401k up to a point. They may match 50% up to 8%. That means for every 1% you put into your 401k, your employer will add .5%. If you put 8% towards your 401k, your employer is giving you an additional 4%.

If you can save more after that, then the Roth IRA is another good retirement option.

Buying a home is a good long-term investment. Better than putting your money into rent that will never give you anything back.

We are planning our retirement assuming SS will be either gone or limited. I want at least 1 million available and the house will be paid off by the time I'm 55.

[Okeefenokee]

So, retirement to put it simply, is to make enough to cover your expenses without having to work?

Good lord...

[MilSpecs]

Don’t forget to factor medical expenses into retirement income calculations. It’s a lot of money, and your needs then will be more than your needs now. Dental, vision, hearing, prescriptions, and supplemental. You can plan to be eligible for Medicaid now, but it’s not easy and that option may not even be there by the time you retire.

And long term care - that’s something you can do cheaply now that may be extremely important when you’re old. I’ve been paying $19 every two weeks for years for a long term care policy for my husband. Trying to buy it when you’re older is much more expensive.

[PartyOf5]

So, retirement to put it simply, is to make enough to cover your expenses without having to work?

Retirement is living after you've quit working a job. People can afford to retire when they have enough money from sources other than work income, which usually consists of some combination of their own retirement savings (401k, selling assets like a home or other property, 403b), Social Security, and possibly a pension or annuity from a prior job.

Save a lot early on, and you increase your chances of retiring earlier or having more money to live on when you retire. Teachers frequently retire around 55 because by that time they are fully vested in their pension and can afford to live off that and SS by that time. Most private sector companies no longer provide pensions, so it is up to the individual workers to save for their retirement. The standard age for retirement used to be 65, but it's probably close to 70 now.

Jedi, how old are you? Even an estimate will give us a better idea of what your current plan should be.